Groceries Adjudicator to have new power to fine supermarkets

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

In a change likely to be widely welcomed by suppliers and farmers, the Government listened to the concerns from stakeholders to give the Adjudicator…

In a change likely to be widely welcomed by suppliers and farmers, the Government listened to the concerns from stakeholders to give the Adjudicator more teeth to protect suppliers from unfair treatment.

If the Adjudicator finds that retailers are breaching the Groceries Code and treating their suppliers unlawfully or unfairly, he or she will be able to apply a range of sanctions. In most cases, this would consist of recommendations or ‘naming and shaming’ but, if the breach is serious enough, the Adjudicator will have an immediate power to fine the retailer.

Jo Swinson said,

“The food industry plays an important role in economic growth, and the Groceries Code Adjudicator will help to ensure that the market is operating in a fair and healthy way. Large supermarkets form a big chunk of this industry, and generally provide consumers with low prices and variety whilst providing business for farmers and suppliers.

“But where supermarkets are breaking the rules with suppliers and treating them unfairly, the Adjudicator will make sure that they are held to account. We have heard the views of the stakeholders who were keen to give the Adjudicator a power to fine, and recognise that this change would give the Adjudicator more teeth to enforce the Groceries Code.

“We expect fines to be used as a last resort, but the fact that the Adjudicator has the power to impose them will send a strong message to retailers that compliance with the Code is not optional. I am confident that these changes will mean that the Adjudicator is able to ensure fair play in the food supply chain and keep the industry growing.”

The Adjudicator will publish guidance within six months after the Bill comes into effect to propose the maximum amount he or she will be able to fine. Retailers would have a full right of appeal against any fines imposed.

The Groceries Code Adjudicator is being established to enforce the Groceries Code after the Competition Commission identified competition issues in their 2008 market study. The Adjudicator will be able to:

arbitrate disputes between retailers and suppliers

investigate confidential complaints from direct and indirect suppliers, whether in the UK or overseas, and from third parties

hold to account retailers who break the rules by ‘naming and shaming’ or, if necessary, imposing a fine

The Adjudicator is being set up through the Groceries Code Adjudicator Bill which is currently passing through Parliament.

**Notes to editors

**1. The proposed maximum level of fine suggested by the Adjudicator will be established by Order by the Secretary of State, taking into account the Adjudicator’s recommendation.

The Groceries Code applies to the 10 retailers with a turnover in the groceries market in excess of £1bn.

The Groceries Code was put in place by the Competition Commission in 2008 and obliges large retailers to:

deal fairly and lawfully with their suppliers;

not vary supply agreements retrospectively, except in circumstances beyond the retailer’s control which are clearly set out in the supply agreement; and

pay suppliers within a reasonable time.

In addition, the Groceries Code:

limits large retailers’ power to make suppliers change their supply chain procedures;

limits large retailers’ power to make suppliers pay marketing costs and compensation for wastage;

requires large retailers to pay compensation for forecasting errors in certain circumstances;

limits large retailers’ power to make suppliers obtain goods or services from third parties who pay the retailer for that arrangement;

limits large retailers’ power to make suppliers pay them for stocking their products;

limits large retailers’ power to make suppliers pay for promotions;

requires large retailers to take due care when ordering for promotions;

limits large retailers’ power to make suppliers pay for resolving customer complaints; and

limits large retailers’ power to ‘de-list’ suppliers in other words, to stop dealing with a supplier or make significant reductions to the volume of purchases from a supplier.

The Government’s economic policy objective is to achieve ‘strong, sustainable and balanced growth that is more evenly shared across the country and between industries.’ It set four ambitions in the ‘Plan for ‘Plan for Growth’ (PDF 1.7MB), published at Budget 2011:

To create the most competitive tax system in the G20

To make the UK the best place in Europe to start, finance and grow a business

To encourage investment and exports as a route to a more balanced economy

To create a more educated workforce that is the most flexible in Europe.

Work is underway across Government to achieve these ambitions, including progress on more than 250 measures as part of the Growth Review. Developing an Industrial Strategy gives new impetus to this work by providing businesses, investors and the public with more clarity about the long-term direction in which the Government wants the economy to travel.

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